“Improving California’s Tax System Through Increasing Diversity and Complementarity of its Revenue Streams”

Darien Shanske* and David Gamage**

*Professor of Law, UC Davis

**Assistant Professor of Law, UC Berkeley

In this presentation we will outline an argument for why states (and local governments) should rely upon a variety of revenue instruments and, more specifically, a wider variety than are currently used in California. The basic arguments for tax base diversity are relatively intuitive. For instance, considering just the problem of tax evasion, tax base diversity helps counter evasion because a taxpayer might evade an income tax through claiming excessive deductions, but this same strategy will not help that taxpayer avoid the sales tax or the property tax. The argument in favor of diversity is complicated by the fact that we operate in a federal system in which the central government relies so heavily on income taxes. There are clearly administrative benefits for states in piggybacking on the federal system. Nevertheless, we will argue that the federal government’s ill-advised tax monoculture has overly influenced the states, particularly states like California that rely very heavily on the income tax.

Professors Darien Shankse and David Gamage received Honorable Mention for their research in this area as part of the Bacon Public Lectureship and White Paper Competition 2015-2016.